42
THE NEW YORKER, JULY 21, 2014
PROFILES
THE HAND ON THE LEVER
How Janet Yellen is redefining the Federal Reserve.
BY NICHOLAS LEMANN
Yellen prides herself on being more in touch with the real world of the economy than
most economists. "I always had an aspiration to be involved in public policy," she says.
In April, two months after Janet Yel-
len took over as chair of the Federal
Reserve Board, she went to New York to
make her first speech to the financial in-
dustry. In a Times Square hotel ball-
room, Yellen, a small woman with a hel-
met of white hair, sat on a three-tier dais,
looking out over a hundred tables of
paying guests. She was visually amplified
by two Jumbotron screens, and read
scripted remarks about her "expectation
that the achievement of our economic
objectives will likely require low real in-
terest rates for some time." It's one of the
institution's central rituals for the chair
to drop deliberately bland hints about
the future direction of interest rates, and
for the markets instantly to respond, as
if on command of an omnipotent genie.
In this case, the movement was upward.
For Yellen, the speech was the equivalent
of an incoming President's reassuring
State of the Union address.
This was not Yellen's first full-dress
o cial appearance. She had gone to
Chicago a few weeks earlier, to speak at
a conference for neighborhood-revital-
ization organizations---not the venue a
new Fed chair would ordinarily choose
for a maiden speech. Yellen was sending
a signal. As she put it that day, "Al-
though we work through financial mar-
kets, our goal is to help Main Street, not
Wall Street." More than five years after
the financial crisis, historically high
numbers of Americans are still out of
the labor force, working part time when
they'd rather be full time, or unem-
ployed for more than six months. Yellen
spoke mainly about unemployment, and
told the stories of three blue-collar Chi-
cagoans, two black, one white, who had
lost their jobs in the recession. Her sta
had found these people for her, and she
had spoken to them on the phone be-
fore her speech.Two of the three---from
Chicago's desperately poor West Side---
had criminal records.
The Federal Reserve Board cele-
brated its centennial last year. Its main
activity has been to try to keep the econ-
omy of the United States healthy by
making adjustments in interest rates,
while also maintaining an atmosphere of
dignified, scholastic, uncommunicative
grandeur---it's the Skull and Bones of
American governance. Yellen is notable
not only for being the first female Fed
chair but also for being the most liberal
since Marriner Eccles, who held the job
during the Roosevelt and Truman Ad-
ministrations. Ordinarily, the Fed's role
is to engender a sense of calm in the
eternally jittery financial markets, not to
crusade against urban poverty. The day
after Yellen's speech in Chicago, I visited
her at the Fed's headquarters, in Wash-
ington, in a classically inspired stone
building with oversized bronze double
doors facing Constitution Avenue.
Sixty-seven years old, she has hazel eyes,
sharp features, and an informal manner.
She speaks with a distinct trace of old
Brooklyn: "goyd" for guide, "wount" for
wouldn't. She recalled how she had de-
cided where to make her first speech.
"I felt I wanted to talk about the Fed's
mission, and I wanted to do so in under-
standable terms," she said. "And to em-
phasize that unemployment is part of our
mission.The recession has taken a partic-
ularly heavy toll on those who have less
education and income---middle-income
and low-income families---and the Fed's
concern with the job market is a theme
I've wanted to get across. Why are we
doing all these things that are in the
newspapers all the time? I was trying to
explain that we're doing this to help
American families who are struggling
in the aftermath of the Great Recession.
I wanted to be completely clear and